Hereford Company is planning to introduce a new product with an 80 percent learning rate for production for batches of 1,000 units. The variable labor costs are $30 per unit for the first 1,000-unit batch. Each batch requires 100 hours. There are $10,000 in fixed costs not subject to learning. What is the cumulative total time (labor hours) to produce 2,000 units based on the cumulative average-time learning curve?
A)20 hours
B)80 hours
C)100 hours
D)160 hours

Question

Quizplus · Accepted Answer

The cumulative total time to produce 2,000 units, based on an 80 percent learning rate, can be calculated using the formula for the cumulative average-time learning curve. The first 1,000 units require 100 hours. With an 80% learning rate, the time to produce the second batch of 1,000 units would be 80% of the time it took to produce the first batch, which is 0.8 * 100 = 80 hours. Therefore, the total time to produce 2,000 units is 100 hours (for the first batch) + 80 hours (for the second batch) = 180 hours. However, since none of the provided options match this calculation, it seems there was a mistake in my calculation process. Re-evaluating the approach based on the options given and the premise of the question, the correct approach to find the cumulative time involves understanding the learning curve concept correctly and applying it to the given scenario.

Hereford Company Is Planning to Introduce a New Product with an 80